‘Grexit may cause domino effect, but should Greece stay in?’

It’s wrong to say Greece must stay in the eurozone. If it left, the market would help it as it’ll be freed of a restrictive ‘one size fits all' straightjacket policy said Richard Wellings, Deputy Editorial Director at the Institute of Economic Affairs.

The President of the EU Commission Jean-Claude Juncker has
questioned the future of the euro. He warned that should Greece
leave the eurozone “the Anglo-Saxon world, will try everything to
break down the euro area piece by piece, bit by bit.”

RT:So Jean-Claude Junker says London and
Wall Street would rip the euro apart if Greece left. Do you
believe him, and how would that happen?

Richard Wellings: There is a danger of a domino
effect: if Greece were to leave the eurozone than some of the
financial markets might think then maybe Spain, Portugal, or
Italy could be next, and they would then drive at the bond yields
and make it more and more expensive for these governments to
service their debts. The question then will be whether the
European Central Bank will move in to bail them out yet again, or
whether German tax payers finally say: “We’ve had enough, just
let them go!” I think he has a point there but clearly these were
ill-judged remarks and they were obviously going to be
misinterpreted.

RT: Junker's not exactly on the best of terms
with the British government, and from his comments, doesn't that
suggest things are only getting worse? What do you think?

RW: I think that shows this huge gulf in the
political culture between the Anglo-Saxon countries and
continental Europe, with the continentals much more skeptical
about free markets and the financial sector settlement, and so
forth.
Having said that, it’s obvious that in some of his other comments
he seemed to have opened the door to some kind of re-negotiation
with the UK. So it is a mixed bag, and there was some comfort for
the UK commentators as well.

RT:So Junker's saying Greece has to stay in
the eurozone. So why are its international creditors, the
so-called Troika, making that so difficult?

RW: Clearly there are different interests here.
I think it’s wrong to say that Greece must stay in the eurozone.
In a sense the market could help some of these countries if they
pushed them out because they will be freed of this restricted
straightjacket of ‘one size fits all’ management policy- this led
to this extreme boom and bust prolonged depression and very, very
severe social problems. So the markets could help these
countries. The EU could move back to a looser more flexible union
that we had before the eurozone was formed in the late 1990’s.
... This is going to be a disaster for the EU. Of course the EU
elites don’t see any reverse gear; it’s all about expanding and
making it an even closer union.

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